Baleno will be made in the Gujarat plant: RC Bhargava

The government's "Make In India" is a very possible action and can succeed if extra costs associated with doing business can be reduced.In an interview with ET Now, RC Bhargava, Chairman, Maruti Suzuki India, talks about the Brezza, the Baleno and the upcoming plant in Gujarat.

ET Now: Brezza has seen over 25,000 bookings in just the first few weeks after the launch and this pace you will easily cross sales of one lakh units in the next 12 months, is this more than what you had expected?

RC Bhargava: Yes, I think so, because actually the number of bookings are now well in excess of 25,000. I believe they are somewhere around 35,000-37,000 and because our monthly production at the moment is about 8000 cars, or maybe it will go a little bit over 8000 cars that is 100,000 a year basis.

We are now having to quote waiting period of four months, actually it will be about three-and-a-half months and it is unfortunate thing in a way that there is such a long waiting period, but this kind of response was not anticipated that we will get such a big booking for the things right from the beginning.

ET Now: Now you will be happy to hear this is a very genuine feedback. Some of my colleagues they tried to book a Baleno but the queue is just too long. I mean you must have heard Yatin he said that he was very keen to buy a Baleno but the waiting period is six to eight months. So what are your plans to ramp up the Baleno production, because clearly I have got buyers standing in my news room?

RC Bhargava: This is something which our entire team, both on the production side, as well as on the supply chain side is looking at, because increasing the production is not only within our factory. If you want to substantially increase the production of a vehicle say by 20-25% or 30% above what you had planned, all the vendors who are supplying the components for the car have also to increase their production capacities and that usually becomes a bigger constraint than what we can do within the factory. So again the same problem with the Baleno. We had plan for a sale of about 10,000 a month.

As you have seen, the demand is much higher than that. So we are increasing our own production capacity to the extent we can and I think this will come into play in the course of the coming months. We are also having to see what we can do to make vendors increase their ability to supply the products required for this car and on a much higher volume than what had been told to them earlier and for which they had planned their production facilities.

ET Now: So the Baleno is the best export car for the company as well from exports to Japan in January and many European countries in February as well. Do you see strong growth coming in from the export markets?

RC Bhargava: The Baleno will be the product to be made in the Gujarat plant, in addition to, of course, what we are doing here. So it is only in 2017 that we can expect to see a significant increase in the volumes of the Baleno because by that time both our suppliers as well as the in-house production capacities will have increased.

At the moment, I think it is a little bit early to say how good the response in the export markets in Europe and Japan will be, because the sale of this car has only started very recently in these markets and I think you have to see the response over a period of a few months to be able to judge whether the sales would be much higher than what we had anticipated or it will be at the same level or what the reactions of the export markets will be. So I would not at this stage predict what the export market volumes will be.

ET Now: After the central government renewed focus on emission and taxing the rich we have seen duties on car go up whereas this will increase burden on the consumer. How do you see this impacting and dampening demand especially in key states like Maharashtra, where duty hike also is very large?

RC Bhargava: It is very hard for me to explain because I do not understand it myself. On one side we are pushing so much for Make In India, increase industrial production, increase employment through industrial production makes a lot of sense to me. The automobile industry in cars, two wheelers, commercial vehicles constitute half of manufacturing industry and cars are a big part of that.

Now everybody understands that there is a price elasticity of demand and if you increase prices, it will have an adverse effect on demand, it is not as if there is no elasticity at all and demand will continue unchanged irrespective of price that is not the case here it is not that kind of a product.

Therefore on one side we want to increase industrial production on the other side we keep putting various taxes and other restrictions on the use of cars so that demand comes down. So, I am afraid I am not able to explain it

ET Now: You have been a market leader in compact cars. Of late we have seen extremely strong competition in this segment and erosion in market share as well., What is the strategy to mitigate competitive risks, especially from smaller companies?

RC Bhargava: In the entry level cars' segment, the lower end of the market, at one time we had a near monopoly in that segment and it was almost like 70-75% of the market was with us. If something like what the car market was before all the other companies came into it, because one time we had 83% of the car market in India, but as competition enters the particular segment, the market share falls. It has fallen in the car from 83 to the present 47%.

In the smaller car segments, in the entry level car segment, it is bound to fall to some reasonable level because the market share we had there was much higher than the overall market share. So that is not a surprising thing and our strategy will continue to remain what it is for the cars generally, which is keep producing new and exciting models, keep increasing the value which we give to customers from these cars, keep improving the quality of sales and after sales service and spare part service which we offer to customers.

We will widen our network, we will move to always keep improving customer friendliness of our dealers and our service workshops, and try and maintain a market share that way.

ET Now: Can you give us an update on the Gujarat plant and by when is the production expected to start?

RC Bhargava: The progress in the Gujarat plant is excellent. They are very much on schedule, perhaps a little bit ahead of schedule and I think commercial production of cars in Gujarat would start early in 2017. You will certainly see some cars from the Gujarat plant in the market during the current financial year before the year ends in March there will be some cars in the market.